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No let up in Alberta Duvernay land rush Aug. 24 sale sees C$463 million spent on exploration rights, for year total of $2.73 billion; focus on ‘prolific’ Duvernay play Gary Park For Petroleum News
The hunger for exploration rights in Alberta’s Duvernay oil and natural gas play continues unabated at government land auctions, with the region attracting C$416 million of C$464 million in successful bids on Aug. 24.
Included in a frenzy of spending was C$124 million paid for a 7,680-hectare parcel (almost 19,000 acres) by an unidentified buyer, beating the previous record of C$106.5 million for a single petroleum and natural gas parcel set earlier this year.
An adjoining parcel in the northern Alberta zone was obtained by Plunkett Resources for C$79.8 million.
The total sale was the third highest in Alberta, trailing well behind this year’s benchmark C$843 million, pushing revenues this year to C$2.73 billion on 3.09 million hectares, C$320 million ahead of the same timeframe last year, but still almost C$700 million short of the calendar-year record in 2006.
A spokesman for Alberta Energy said the government expects total revenues of about C$3 billion for 2011, 50 percent more than it budgeted in March.
Jeremy Kaliel, an analyst with CBC World Markets, said the results are an indication of how badly E&P companies want land positions in the Duvernay play, which he described as a “prolific source for oil and gas” that has produced for years from shallower vertical wells and is now “flavor of the month” as producers have turned to horizontal drilling and multistage well fracturing.
Ray Kwan, an analyst with Macquarie Securities, said the large bonus bids are likely prospective for both oil and liquids-rich gas in the Duvernay.
Science experiment In a recent report, Macquarie said activity in the Duvernay shales has largely been a science experiment so far, with only 24 wells licensed or drilled to date, including 15 vertical delineation/test wells and nine horizontals.
A partnership of Celtic Exploration, Trilogy Resources and Yoho Resources has drilled two horizontal wells. One tested at 2.1 million cubic feet per day of sweet natural gas and 75 barrels per thousand cubic feet of natural gas liquids and condensate, with only six of 13 planned stages fracked, the other tested at 5.2 million cubic feet per day of gas and 390 barrels of liquids.
Encana and Talisman Energy have recently disclosed that they are among the successful Duvernay bidders, while Chevron, Husky Energy and Daylight Energy plan wells through 2012.
Other players are Birchcliff Energy, PetroBakken Energy, Sonde Resources, Bellatrix Exploration, Bonavista Energy and Longview Oil, each of which plans at least one well later this year or in the first quarter of 2012.
Duvernay main driver Brad Hayes, president of Petrel Robertson Consulting, said the Duvernay appears to be the main driver of the bidding, with some of the larger land postings containing deeper rights only.
Greg Scott, president of Scott Land & Lease, which acquired more than 50 percent of the Aug. 24 parcels for about C$233 million for unidentified clients, said the sale results are encouraging for the future of the oil and gas industry in Alberta.
Gary Leach, executive director of the Small Explorers and Producers Association of Canada, said the bidding interest indicates strong industry confidence in horizontal well-completion technology which should translate into high levels of investment over the next couple of years.
With oil prices recovering from a recent 25 percent drop, he is counting on more strong sales over the balance of 2011.
First Energy Capital reported a continuing surge in drilling activity in Western Canada, where 64 percent of the rig fleet was active Aug. 19, compared with 49 percent a year earlier.
CIBC World Markets analyst Jeff Fetterly said the investment by producers in raw land points to solid or increased activity, but “at this point it’s difficult to tell when.”
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